B.C. backtracks on dual agency ban

British Columbia has backtracked on part of its proposed dual agency ban that would have forced Realtors in the province to recuse themselves from representing both home buyers and sellers in certain cases.

New rules that would originally have come into effect on March 15 have been postponed until June 15 to allow for greater education on the changes.

The update by the Office of the Superintendent of Real Estate (OSRE) was announced to licensees on Feb. 9 and came after rules announced in January received harsh criticism from Realtors.

“I think it’s very good news,” says Jim McCaughan, managing broker at Sutton Group West Coast Realty in Abbotsford, B.C. and a former president of the British Columbia Real Estate Association.

“I think we’re going to end up with the ability to do single recusal as long as we have the consent of both parties,” something that should be possible in almost all cases, he says.

In its memo to licensees, the OSRE notes it “is aware of the considerable concern from industry surrounding the implementation of the new rules and the impending implementation date.”

The OSRE notes that in ending dual agency, it was its “intent that a licensee be able to continue to work with only one party to the trade in real estate where there is a conflict relating to client representation – as long as they receive consent from all parties involved in the transaction.”

“They aren’t using the words ‘we are taking away double recusal,’” says McCaughan. But “if you read between the lines (it) clearly indicates that we’re back to single recusal.”

A new rule will be drafted and there will be a 30-day public consultation.

Realtors noted that the previous rule, slated to come into effect March 15, would have limited consumers’ choices of real estate agents and went much further than the industry expected.

New rules forbidding dual agency (where a real estate licensee represents two parties in a sale) originate from recommendations in a 2016 report of the Independent Advisory Group on Real Estate Regulation in B.C.

The report was prompted by allegations that some Realtors, primarily in the booming Lower Mainland market, were engaging in the controversial but legal practice known as shadow flipping. According to the Superintendent, ending dual agency removes the potential for conflict and serious problems and creates transparency for both consumers and licensees.

Realtors initially expected they would be able to represent one party but not the other in a transaction – or single recusal – and would be able to refer one party in a sale to someone else.

But when new rules were announced on Jan. 11 “they said to us ‘you can’t represent both parties (and) should be referring both,” in what is double recusal, McCaughan says.

Under the old rules, when a Realtor had two buyers looking for similar homes and both wanted to make an offer on the same property, the Realtor could represent each buyer independently and both could make an offer on the listing, if both buyers provided informed consent in writing.

In effect, under the January announcement, Realtors would not be able to represent either of the buyers.

McCaughan says it would have meant that in the case of a Realtor who has a listing with a long-time client who then finds a buyer client who wants to buy the property, the Realtor would have to say “Sorry, I won’t be able to represent you in this transaction. I’m going to need to send you to a colleague or if you’d rather find your own, you have that option.”

Real estate rules in B.C. are made by the Superintendent of Real Estate but interpreted and enforced by the Real Estate Council of B.C.

The initial January rules also placed a narrow exemption on the dual agency ban for remote areas underserved by licensees and where an alternative to dual agency would be impracticable.

But that exemption would have served no purpose for Realtors in rural areas, says John Evans, president of the B.C. Northern Real Estate Board.

He says a Realtor could always be made available to serve consumers in remote areas, even if that Realtor did not have local market knowledge.

Evans, who is managing broker of Re/Max Coast Mountains in Prince Rupert, B.C., says the rules banning dual agency are in response to the real estate scene in the Lower Mainland and that shadow flipping is “impossible” in his area.

“It’s a very unique Vancouver market where housing prices can go up by $100,000. In order for a house to go up by $100,000 in my market area, it could take 10 years. It is not a one size fits all rule.”

McCaughan says the B.C. Real Estate Association created a Realtor call for action to write letters to the premier objecting to the rules that were announced in January.

“We provided them with factual information. There were many people that wrote in stories about what would happen with them in a real-life situation,” he says.

“I think that the industry by and large will be very relieved to see what we interpret as a more reasonable approach,” McCaughan says of the February update. “It will give the consumer the choice. If they’re not happy to work with me, knowing that I’ll still be working with you, then they could go to a new source for information if they want to. I think it’s a completely positive step.”

While the Superintendent’s new rules restrict the practice of dual agency, they do not restrict the practice of “double-ending,” in which a listing brokerage earns 100 per cent of the commission if the buyer is unrepresented.

“However,” an explanation from website of the Real Estate Council of B.C. notes, “licensees should remember that dealing with unrepresented buyers creates significant risks for the licensee, the unrepresented buyer and the licensee’s client.”